Edtech major Byju’s subsidiary Aakash is in talks to raise $250 million in a pre-IPO round through convertible notes, according to sources aware of the development. The convertible notes will have a discount of 20% on the listing price for incoming investors. Sources said some Byju’s investors may participate in the funding round.
Byjus acquired Aakash in 2021 in a cash and stock deal worth $950 million, which also gave a large cash exit to Aakash’s key investor Blackstone.
“The IPO will definitely happen this year in the Indian market and the company has already consulted with bankers. Byju’s management, however, hasn’t decided on a timeline yet since the process involves filing DRHPs and completing other compliances,” sources said.Sources also indicated that a $300-million funding round, for which Byju’s has been in talks with TPG, will be delayed due to investor compliance checks.
Byju’s declined to offer comments on the matter.
The acquisition of Aakash by Byju’s is one of the biggest deals in India’s edtech market, but has also been in the news for delayed payments to some key investors. At the time of the acquisition in April 2021, Byju’s had said Aakash would continue to function independently although Aakash’s founders and Blackstone Group were allocated cash and stock exits.
Though Byju’s cleared payments that were due to Aakash’s founder in July last year, the payment to Blackstone was deferred based on a mutual agreement. Aakash’s founder and Blackstone continue to hold a minority stake in the firm. By September 2022, the remainder of $250 million owed to Blackstone was also settled, more than a year after the announcement of the acquisition.
Byju’s had a tumultuous 2022, marked by a series of layoffs and a controversy surrounding the late filing of its FY21 results. After a delay of nearly 18 months, Byju’s filed its FY21 results in September 2022, reporting its net loss rising up to Rs 4,588 crore from Rs 231.69 crore in FY20. The company’s total revenues during the year saw a marginal decline of 3.32% to Rs 2,428.39 crore.
The huge jump in losses during the year was due to the deferral of 40% of revenues to subsequent years, but costs not getting deferred. Founder Byju Raveendran had then said losses would reduce in FY22. For FY22, he had then said the company had registered nearly Rs 10,000 crore in gross revenues. The company is yet to file its FY22 results with the ministry of corporate affairs.
In October last year, Byju’s laid off around 2,500 employees — 5% of its 50,000-strong workforce — across various subsidiaries, including Toppr, Meritnation, TutorVista, Scholr, and HashLearn to “avoid redundancies” in roles. The edtech firm said that these businesses, which came to it as part acquisitions, will be consolidated as one unit. Only Aakash and Great Learning, which were acquired in 2021 and 2022 respectively, will continue to function as separate organisations. The edtech market has lately been going through a rough period of correction. The industry had topped the list of sectors with the highest number of layoffs in 2022. More than 18,000 employees are believed to have lost their jobs in the sector so far due to a downturn in the market. Apart from Byju’s, Unacademy, UpGrad, and Vedantu reportedly slashed as many as 7,000 jobs last year.